Summary:
Insurer which had paid benefits to claimant sought indemnification
from carrier at risk following earlier injury (State Fund). State
Fund sought to amend its response to WCC petition to allege that it
should not be required to indemnify other insurer for medical benefits
which were unreasonable or for temporary total disability benefits
claimant should not have received because he was able to work. Other
insurer argued that State Fund's motion to amend was untimely under
Court Rules.

Held:
Good cause existed to extend deadline for filing motion by one day
where parties had already agreed to postpone trial date and proposed
amendment appeared to state tenable defense. In allowing amendment,
WCC noted one insurer has right to claim indemnification for benefits
which "should have been paid" by another carrier. Question
raised is whether what "should have been paid" can be determined
by hindsight and regarding appropriate standard for refusing indemnification
for medical or disability benefits on the ground they were not reasonably
paid.

Topics:

Constitutions, Statutes,
Regulations and Rules: Workers Compensation Court Rules: ARM 24.5.316.
Where time for filing motion to amend response to petition has been
set in WCC scheduling order, and missed by one day by moving party,
the question is whether there is good cause to extend the deadline and
excuse the moving party from its failure to file a timely motion. Where
the deadline was missed by one day, the parties have already agreed
to postpone the trial date, and the proposed amendments appear to state
tenable defenses, the amendment of the response is allowed.

Indemnification: Between
Insurers. Insurer which had paid benefits to claimant sought indemnification
from carrier at risk following earlier injury (State Fund). State
Fund sought to amend its response to WCC petition to allege that it
should not be required to indemnify other insurer for medical benefits
which were unreasonable or for temporary total disability benefits
claimant should not have received because he was able to work. In
allowing amendment, WCC noted one insurer has right to claim indemnification
for benefits which "should have been paid" by another carrier.
Question raised was whether what "should have been paid"
may be determined by hindsight, which WCC doubted was proper standard.
Although not resolving issue because not adequately briefed, WCC suggested
that if insurer used reasonable judgment in adjusting claim it may
be inequitable to deny indemnification based upon subsequently discovered
facts. On the other hand, if insurer's adjustment practices were unreasonable
and it paid, for example, benefits for medical procedures it knew
or should have known, at the time of payment, were not reasonable,
then it may be inequitable to allow indemnification.

Procedure: Motions:
Generally. Where time for filing motion to amend response to petition
has been set in WCC scheduling order, and missed by one day by moving
party, the question is whether there is good cause to extend the deadline
and excuse the moving party from its failure to file a timely motion.
Where the deadline was missed by one day, the parties have already
agreed to postpone the trial date, and the proposed amendments appear
to state tenable defenses, the amendment of the response is allowed.

¶1 The Court
has before it the respondent State Compensation Insurance Fund's motion
to amend its response to the petition. The motion is granted
with the proviso set forth in the discussion below.

Factual Background

¶2 Petitioner, Insurance
Company of State of Pennsylvania (Pennsylvania), and respondent State
Fund are insurers for successive work-related injuries suffered by claimant.
State Fund was the insurer at risk for a first back injury which occurred
September 3, 1996. It accepted liability for the injury and paid benefits.
Thereafter, claimant returned to work at another job. In late March
1998, she ceased work on account of back pain. At that time, her employer
was insured by Pennsylvania, however, in late April the State Fund commenced
benefits under a reservation of rights. Later, in August 1998, the State
Fund stopped benefits based upon its determination that claimant had
suffered a new injury in March 1998. Pennsylvania then began paying
benefits but alleges in this action that the State Fund is liable for
the benefits because claimant either had not reached maximum medical
improvement in March 1998, or she suffered only a temporary aggravation
of her preexisting condition. Through this action, it seeks indemnification
from the State Fund for benefits it has paid the claimant.

¶3 The petition herein was
filed on September 7, 1999, and initially set for trial during the week
of February 21, 2000. (September 14, 1999 Scheduling Order.) On October
13, 1999, the State Fund filed its response.

¶4 On February 14, 2000,
at the request of the parties, an Order Resetting Scheduling Order was
issued resetting the trial for the week of May 8, 2000. The Order provided
that all pretrial motions, including motions to amend pleadings, must
be filed "on or before March 31, 2000." (Order Resetting Scheduling
Order, underlining in original.) It further required that all written
discovery was to be served by March 24, 2000, and lists of witnesses
and exhibits exchanged by March 31, 2000. (Id.)

¶5 On April 4, 2000, the
Court received the State Fund's Motion to Amend Response to Petition
for Hearing, Memorandum in Support of Motion to Amend Response to Petition,
and a proposed Amended Response to Petition for Hearing, all of which
were dated and sent April 3, 2000. Under this Court's rules, the documents
were deemed filed on April 3, 2000. Rule 24.5.303(5).(1)

¶6 In its amended response,
the State Fund seeks to raise two issues regarding the amounts it may
owe Pennsylvania. First, it asserts it should not have to reimburse
Pennsylvania for some medical expenses which it alleges were unreasonable.
Second, it alleges it should not have to reimburse Pennsylvania for
some portion of temporary total disability benefits. This latter allegation
is based on surveillance conducted by an investigator hired by the State
Fund. According to the State Fund, the surveillance shows claimant engaging
in various physical activities "that would appear potentially inconsistent
with Claimant's stated physical capacity, and potentially inconsistent
with the Petitioner's ongoing payment of temporary total disability
benefits to the Claimant." (Memorandum at 2.)

Objections to the Motion

¶7 Claimant does not resist
the motion to amend, however, Pennsylvania does. In opposing the motion,
Pennsylvania points out that the State Fund received the investigative
report on February 4, 2000, a full 60 days before it filed its motion.
(Objection to Motion to Amend Response to Petition at 2 and Ex. D.)
It further points out that much of the information concerning medical
payments forwarded to the State Fund was forwarded prior to January
2000 (Id. at 2 and Exs. B and C), and that the full amount
of medical benefits was provided to the State Fund in December 1999
(Id. at 2 and Ex. C.) Pennsylvania argues that the two new
issues raised by the State Fund have not been mediated and would require
additional discovery, thus potentially delaying a trial.

Discussion

¶8 The time for filing a
motion to amend a pleading is governed by Rule 24.5.316(1), which provides.

(1) Unless
a different time is specified in these rules, the time for filing
any motion to amend a pleading, to dismiss, to quash, for summary
judgment, to compel, for a protective order, in limine, or for other
relief shall be fixed by the court in a scheduling or other
order. [Emphasis added.]

Since the scheduling order
fixed March 31, 2000, as the deadline for filing a motion to amend a
pleading, the State Fund's motion is untimely. The question posed to
the Court therefore becomes whether there is good cause to extend the
deadline and thereby relieve the State Fund from its failure to timely
file its motion.

¶9 State Fund cites Rule
15(a), Mont.R.Civ.P., as authority for granting its motion to amend.
That rule provides that under circumstances inapplicable here, a party
may amend the party's pleading once as a matter of course, otherwise
it must obtain leave of court to amend. The rule further provides that
"leave shall be freely given when justice so requires."(2)
Unlike this Court's rule, however, Rule 15(a) does not fix a time for
filing a motion for leave to amend. While this Court has no quarrel
with Rule 15(a)'s proviso that "leave shall be freely given when justice
so requires," the State Fund's failure to comply with the deadline for
filing its motion must be considered in determining whether "justice"
requires the Court to grant its motion.

¶10 The State Fund offers
no excuse or explanation for the delay in filing its motion. It has
not filed a reply brief to Pennsylvania's brief in opposition to the
motion, nor has it contested the exhibits Pennsylvania attached to its
brief. The Court must therefore accept Pennsylvania's statement that
the State Fund had the investigative report which gave rise to the requested
amendment some 60 days prior to the Court's deadline. As to the reasonableness
of the medical bills, the State Fund offers no explanation of what evidence,
if any, it did not have prior to the deadline. Balanced against these
considerations is the fact that the motion was late only by one business
day. (March 31st was a Friday and April 3rd a
Monday.) In addition, Pennsylvania does not raise the missed deadline
as a ground of its opposition. Finally, the parties have since agreed
to a special trial setting of June 30, 2000, thus giving the parties
an additional two months if additional discovery is necessary.

¶11 The general rule governing
amendments to pleadings was long ago expressed in the following terms:

Generally
speaking, the authority to allow amendments is reposed in the sound
discretion of the trial court. And it is the rule to allow, and the
exception to deny, amendments.

Fowlis v. Heinecke,
87 Mont. 117, 120, 287 P. 169, 170 (1930); accord Northern Montana
Ass'n of Credit Men v. Hauge, 111 Mont. 56, 105 P.2d 1102, 1104
(1940). While the State Fund might have filed its motion to amend at
an earlier time, the Court's scheduling Order allowed it to file the
motion on March 31st and it was only a day late. In light
of the rescheduling of the trial, it is doubtful that the amendment
will prejudice Pennsylvania. I am therefore inclined to extend the time
for filing by one day and grant the motion.

¶13 At issue is the scope
of the right of indemnification. Pennsylvania argues that if the Court
finds the State Fund is responsible for the claim, then it had a duty
to accept liability and pay benefits, and cannot now second guess Pennsylvania's
payments of benefits. (Objection to Motion to Amend Response to Petition
at 3.) State Fund argues that the right of indemnity extends only to
sums it "should have paid" and does not extend to benefits paid but
to which claimant was not in fact entitled. It seizes on language in
Chaney v. USF&G, 276 Mont. 513, 519-20, 916 P.2d 912, 916
(1996), which said:

We have recognized a workers'
compensation insurer's right to recover benefits that should have
been paid by another carrier. For example, in EBI/Orion Group
v. State Comp. Ins. Fund (1989), 240 Mont. 99, 104, 782 P.2d
1276, 1279, we stated that "[t]he right of indemnity is that where
one is compelled to pay money which, in justice, another ought to
pay, the former may receive from the latter the sum so paid." We have
also stated:

If it is
later determined that the insurance company on risk at the time of
the accident should not pay the benefits, this insurance company,
of course, has a right to seek indemnity from the insurance company
responsible for the benefits already paid out to the claimant.

¶14 The question raised is
whether what "should have been paid" is to be determined by hindsight.
I think not. If the State Fund had accepted liability, then Pennsylvania
would not have been required to adjust the claim at all. If Pennsylvania
used reasonable judgment in adjusting the claim it would be inequitable
to deny it reimbursement based upon subsequently discovered facts. On
the other hand, if Pennsylvania's adjustment practices were unreasonable
and it paid, for example, benefits for medical procedures it knew or
should have known, at the time of payment, were unreasonable, then it
would be inequitable to order the State Fund to reimburse it for those
benefits.

¶15 However, the limits,
if any, of recovery under indemnity principles have not been adequately
briefed or argued. The Court's own quick review of Montana cases indicates
there are no Montana cases on point, or even analogous. I therefore
will permit the amendments but reserve ruling as to whether the State
Fund may be liable for unreasonable medical payments or for benefits
which appeared reasonable at the time paid but in retrospect were not
due.

ORDER

¶16 Based on the foregoing
discussion, leave is granted the State Fund to file its amended response.
Since the amended response is already lodged as an attachment to the
State Fund's motion, it will be stamped as filed on today's date and
no further filing is necessary.

¶17 A new scheduling order
will issue extending the deadlines for further discovery and for other
pretrial matters.

(5) Unless
the court specifically orders otherwise, filing with the court may be
accomplished by mail addressed to the clerk, and such filing will be
deemed complete on the date shown on the certificate of mailing.

(a) Amendments.
A party may amend the party's pleading once as a matter of course
at any time before a responsive pleading is served or, if the pleading
is one to which no responsive pleading is permitted and the action
has not been placed upon the trial calendar, the party may so amend
it at any time within 20 days after it is served. Otherwise a party
may amend the party's pleading only by leave of court or by written
consent of the adverse party; and leave shall be freely given when
justice so requires. A party shall plead in response to an amended
pleading within the time remaining for response to the original pleading
or within 10 days after service of the amended pleading, whichever
period may be the longer, unless the court otherwise orders.